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Finance Bill, 2020 has inserted a new TCS provisions Section 206 (1H) of the Income Tax Act, 1961, to charge TCS on sale of goods, which was to be effective from 1st April 2020. However, the Parliament while passing the Finance Bill in the Lok Sabha amended the said section and has also postponed the date from which it becomes operative to 1st October 2020 instead of 1st April 2020. The newly introduced provisions will be effective from 1st October 2020.
Section 206C(1G)(a) – Tax Collection
at Source (TCS) on foreign remittance
through LRS or Liberalised Remittance Scheme.
Section 206C(1G)(b) – Tax Collection at Source
on sale of overseas tour package.
And Section 206C(1H) – TCS on sale
of any goods [except the goods on which TCS applies as per Section 206C (1),
206C (1F), and 206C (1G)].
The tax collected at source is the tax payable by the seller or merchant at the time of sale. S. 206C of the Income Tax Act, 1961, governs the TCS. Newly inserted TCS provisions have been explained in this article. Section 206(1H) added to the TCS Provisions vide Finance Bill, 2020.
The exceptions to this provision are mentioned below:
Authorised dealer, according to TCS provisions, means any person authorised by the Reserve Bank of India under S. 10 (1) of the Foreign Exchange Management Act, 1999, to deal in any foreign scrutiny or exchange.
This section is not applicable in the following cases:
Overseas tour program package as per the new TCS provisions are explained as any tour package which offers a visit to a foreign country /countries or territory/ territories out of India. It includes expenses for travel or hotel stay or boarding or lodging or any other expense of similar nature or in relation thereto.
Also, Read: TDS Penalty in India.
There are certain people or organisations that have been classified as sellers for tax collected at source (TCS). No other seller of goods can collect TCS from the buyers apart from the following given list :
Similarly, only some buyers are eligible to pay the tax at source (TCS) to the sellers. The list of buyers is mentioned below:
a. Any traders or dealers selling goods online would receive the payment from an online platform after deducting the amount tax at the rate of1 % under IGST Act. (0.5% in CGST & 0.5% in SGST)
b. The tax must be deposited to the Government by the 10th of the next month.
c. All the dealers or traders are required to get GST Registration. It is a mandatory process.
d. The provisions are effective from 1st October, 2018.
The points to be considered for collecting tax at source are as follows:
Since the effect of TCS on the sale of goods is vast, so it
is estimated that the Government will bring some clarification on the given
points, which will resolve several issues associated with the same. Primarily,
the buyer use to deduct TDS under section 194C for the supply of goods by
vendors, which is classified as a works contract by the vendor. So if supplies
are providing works contract services (which includes goods) and buyer is
deducting TDS under the Income-tax Act, then TCS provisions on the supply of
goods will not apply to vendor/supplier/ seller.
See Our Recommendation: TDS and TCS Provisions are notified under GST.
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